CarMax Inc (NYSE:KMX) Reports Q2 FY2026 Earnings Miss, Shares Drop in Pre-Market Trading

CarMax Inc (NYSE:KMX) reported financial results for the second quarter of fiscal year 2026 that fell short of analyst expectations, prompting a significant negative reaction in pre-market trading. The used vehicle retailer faced a challenging quarter characterized by declining unit sales and pressure from its financing arm.

Earnings and Revenue Miss

The company's performance for the quarter ended August 31, 2025, did not meet Wall Street's forecasts. The key figures highlight the extent of the miss:

• Earnings Per Share (EPS): Reported $0.64 per diluted share, a sharp decline from the $0.85 reported in the same quarter last year. This fell well below the analyst estimate of $1.06.
• Total Revenue: Came in at $6.59 billion, a 6.0% decrease compared to the prior year's second quarter and below the estimated $7.14 billion.

This earnings miss reflects broader challenges in the quarter, primarily driven by a decrease in consumer demand for used vehicles.

Operational Performance Overview

The press release detailed several key operational metrics that contributed to the lower-than-expected results. While the company maintained solid unit margins, overall sales volume declined.

• Retail Sales: Combined retail and wholesale used vehicle unit sales decreased by 4.1% year-over-year. Specifically, retail used unit sales dropped 5.4%, with comparable store sales down 6.3%.
• Gross Profit: Total gross profit decreased 5.6% to $717.7 million. However, gross profit per retail used unit remained stable at $2,216, consistent with the prior year.
• CarMax Auto Finance (CAF): Income from the company's financing segment decreased 11.2% to $102.6 million. This was primarily due to a significant increase in the provision for loan losses, which rose to $142.2 million from $112.6 million a year ago, reflecting worsening performance in certain loan vintages.

In response to these challenges, management emphasized cost-control measures. Selling, general, and administrative (SG&A) expenses decreased by 1.6% to $601.1 million. Furthermore, the company has established plans for incremental SG&A reductions of at least $150 million over the next 18 months.

Market Reaction and Forward Outlook

The market's reaction to the earnings report was decisively negative, with shares down approximately 7% in pre-market activity. This sell-off is a direct response to the significant misses on both the top and bottom lines.

The company did not provide a specific quantitative financial outlook for the coming quarters in the press release. Investors will now look to the upcoming conference call for more color on management's expectations. For comparison, analyst estimates for the third quarter of fiscal 2026 project revenue of approximately $6.41 billion.

CEO Bill Nash acknowledged the quarter's difficulties but expressed confidence in the long-term strategy, stating, “While this was a challenging quarter, we remain confident in our long-term strategy and the strength of the earnings model that we have built.” He also highlighted the recent launch of a new brand campaign, "Wanna Drive?", aimed at emphasizing the company's omni-channel experience.

Conclusion

CarMax's second-quarter results underscore the pressures facing the used car market, including shifting consumer demand and credit performance. The substantial earnings and revenue miss, coupled with a decline in key sales metrics, has eroded investor confidence in the near term. The company's focus on cost efficiency and its ongoing digital initiatives will be critical areas for investors to monitor as it navigates the current environment. The path to regaining market favor will likely depend on demonstrating an ability to stabilize sales volumes and improve the profitability of its financing operations.

For a detailed breakdown of future earnings estimates and historical performance, you can review the data available on the KMX earnings and estimates page.

Disclaimer: This article is for informational purposes only and does not constitute financial advice or a recommendation to buy or sell any security.